Delhi bench of CESTAT ruled that penalty cannot be levied if Assessee reversed the cenvat credit along with interest even before the issue of show cause notice.
The bench was hearing the appeal of M/s.Prem Motors (P) Ltd, who is an authorised dealer of Maruti vehicles engaged in maintenance of such vehicles and sale of spare parts, etc.
The assessee was availing the cenvat credit on various input and input services, the issue arose with the non-maintenance of the separate account in respect of input services as required under Rule 6 of Cenvat Credit Rules, 2004. Accordingly, Revenue planned to recover cenvat credit and proceeded to demand and the lower authority confirmed the action of Revenue and imposed the penalty of the equivalent amount.
Assessee carried the matter to this tribunal and contended that trading deemed as exempted service formed as a concept in the Service Tax Rules only with effect from 1.4.2011. Appellant also added that prior to that no such deeming provision nor did the department have any basis to hold such activity as service at all.
The Assessee raised a major contention that when revenue pointed out the non-maintenance of separate account will lead to trading activities not eligible for the cenvat credit. At that very moment itself even without issuing show cause notice Assessee reversed the credits of all the common input services along with applicable interest of Rs.3.86 lakhs.
On counterpart, Assessee reiterated the findings of the lower authorities. A single bench member Ravichandran heard the contention and perused the record was impressed with the aforementioned contention of Assessee and directed to close the matter in terms of Section 73(3) of the Finance Act, 1994.
Finally, bench announced that it is the fit case for deleting the penalty in terms of Section 80 of the Finance Act, 1994 as the appellant had shown reasonable cause for non-payment.
Accordingly, tribunal deleted the penalty imposed on appellant since the reversal of credit along with applicable interest has done by Assessee.
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